CONSTRUCTION FINANCE: LENDERS PERSPECTIVE

Lower and Middle Income Segment

India - Preview

Total Population of India-1.5 billion

India - Preview

Economic Classification

2

9

48

221

726

9

17

74

285

710

20

33

120

404

613

2001-02 2005-06 2009-10(E)

Rich (Above 115,000)

High Income

(57,000–115,000)

Working class(10,200–23,000)

Needy (Below 10,200)

Annual Household Income (in

US$)*

* In PPP terms

Pop

ula

tion

(m

illion

)

Need for ‘Affordable Housing’

Huge gap between demand & supply Developer focus on Higher Income Groups in

Urban areas with higher margins. Un-regulated/Un-authorised/ Un-planned

housing units for the lower and middle income group

Inadequate infrastructure & basic amenities in Low-cost projects/ units

Inadequate access to affordable finance to the lower and middle income segment

The ‘Rural Story’…

Migration from rural to urban areas Attractive employment opportunities Increase in family size Poor availability of basic amenities for

education, medical facilities, entertainment, lifestyle etc.

Aspirations for upward economic mobility Significant “short haul” migration to smaller

towns by persons moving to non-agricultural employment

Opportunities…

Opportunities for developers and Lenders

Significant opportunities in tier II & III locations Large untapped demand for affordable housing Lower land cost and relatively stable prices Adequate margins available to both Good demand for well developed “basic”

layouts in Gram panchayat areas abutting small towns

Lower risks as purchasers are end users not speculators or investors

Opportunities…

Opportunities for developers and Lenders

“Sell and build” model for small units as opposed to “build and sell” lowers project selling risk

Lower project cost disperses lenders risks & lowers barriers to entry for smaller builders/developers

“Local” developers more in tune with local market “Local” market fairly insulated from global swings Remittances from larger urban centers create

upgrade demand for family homes

Our Initiatives in affordable housing

Financing “Self” Construction on owned land

“Plot Loans” with construction finance

Ready Unit finance

Finance for layout development & construction

Project finance for apartment construction

Project finance for mass affordable housing

DHFL Property Services

Tie-ups with various developers in tier II and III locations for project cost management and sales

Provide technical and legal support

Introduce technologies to reduce cost and time of construction

Help create proper amenities like roads, schools, hospitals, playground, clean drinking water, drainage etc.

‘Mass Housing Scheme’ in the MIG and the LIG segments like MHADA and DDA initiatives with private developers for larger towns

Increasing availability of affordable housing close to workplace by regulating land use in newly developing townships & redevelopments

Support for infrastructure development in smaller towns and rural locations

Recommendations

Government subsidies and tax exemptions to developers and HFC’s in tier II & III locations

Provision of housing finance at a lower interest to individuals in the Low and middle income segment

Refinance from NHB to HFC’s to promote larger affordable housing schemes in urban and rural locations

Recommendations

Rajeev.Sathe@dhfl.com

Thank You